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China's 'symbolic' entry into an elite IMF club

Monday, October 03, 2016 - 01:44

IMF Chief Christine Lagarde called China's yuan entry to its Special Drawing Rights currency basket an ''historical milestone''. But, as Tara Joseph reports, some say it's just a symbolic move as China is still a long way from fully opening up its currency and its markets.

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On the face of it - a milestone for China's reach toward the global economy. The International Monetary Fund adding the yuan to its elite reserve basket at the weekend... an emergency money pile made up of currencies deemed strong enough to lend out in an emergency. The move gives the yuan pride of place alongside the likes of the dollar and the Euro... Though many see this as a largely symbolic move. That's because in the eyes of investors and traders, China is still a long way from fully open up its currency and its markets: (SOUNDBITE) (English) CMC MARKETS ANALYST, JASPER LAWLER, SAYING: "There's two schools of thought. One is that now they're in the basket there's going to be probably less ability from the People's Bank of China to specifically target a depreciation. The other side of the coin is that now that they've gone through this period of qualifying for being in the IMF basket, now they can actually resume that depreciation that we saw at the start of the year and actually the yuan is at very low levels against the US dollar and so where we start to see things suddenly start to drop again, I think these fears are going to re-emerge." U.S. Presidential candidate Donald Trump has already labelled China a currency manipulator - And Treasury Secretary Jack Lew says he thinks the yuan is "quite a ways" from achieving global reserve currency status. Still, the IMF's symbolic gesture marks a sign of the times. This is the first time a new currency has been added to the reserve cash pile since the euro was launched 17 years ago... And in terms of value, the yuan's taking up a larger share of the basket that both the yen and the British pound.

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China's 'symbolic' entry into an elite IMF club

Monday, October 03, 2016 - 01:44